In 2007 prices behaved predictably: slightly grew from January to April, slid down slowly till September and then picked up again. At this time the working out of the regulation stopped to progress and it was commonly expected that its rigid requirements would be lifted, softened or postponed.

In May 2008 the Law was passed in its second and third readings – and purchase prices for whole milk dropped from 14 to 11 rubles per litre. By the end of 2008 (as can be seen at Picture 1) the price was 14% below the year’s start level. It has never been the case in any of the examined periods. The Russia’s average does not fully illustrate the tragedy of the situation: in mid-May 2008 the price for milk in Volgograd region fell down to 4 rubles per litre1, in September the average purchase price there was only 5.5-8 rubles per litre.

The price fluctuations could be due to lower demand for milk in retail trade: the Agricultural Minister A.Gordeev stated that in 2008 the consumption of milk in Russia was 5% below that in 20073. This decrease of consumption could be explained by the lowering of personal by the beginning of the month incomes. There are studies proving that 1 2 3 4 5 6 7 8 9 10 11 demand for milk is 2006 2007 2008 not income-elastic for only 20% of consum- Fig. 2. Average prices for milk received by Russian farm producers in 2006-1 Molochny tupick. 14.05.08 http://www.agro.ru/news/comments.aspxid=2 http://news.ya34.ru/news/3 Gordeev A. Meeting of the Cabinet of Ministers’ Presidium of February 10, 2009.

Rubles per kg ЭКОНОМИКО-ПОЛИТИЧЕСКАЯ СИТУАЦИЯ В РОССИИ ЭКОНОМИКО-ПОЛИТИЧЕСКАЯ СИТУАЦИЯ В РОССИИ RUSSIAN ECONOMY: TRENDS AND PERSPECTIVES ers with the highest Price received by farm 30 income level. All othproducers er population strata reduce its consumpPrice for packaged milk received by tion as their incomes processors decrease1. Therefore Retail price for the demand for milk packaged milk will continue falling in line with the crisis’ deepening. The 1 2 3 4 5 6 7 8 9 10 11 12 lowering of demand in retail trade should by the beginning of the month have influenced pricFig. 3. Prices for milk at different stages of product chain in 2008 (Russia’s average) es all over the chain “retailer-processorfarm”. However, the data about processors’ and retail prices for milk do not confirm this assumption: while prices received by farms for fresh milk were falling, prices received by processors and retailers were climbing up (Picture 3).

Picture 3 shows that in May (when the procedure of adopting the regulation was underway) the prices for milk received by processors and retailers surged up. Prior to the adoption of technical regulation (April 1, 2008) the share of farm producers in retail price for packaged milk with 3.2% fat content was 54% (almost like that in Canada2), and on June 1, 2008 – only 34%. This implies that the transition to technical regulation put agricultural producers not in better but in worse conditions – Table 1.

Surveys of milk purchase prices’ behavior usually state that they have “suddenly fell”.

However, the putting together of dates of the Law’s progress in the State Duma with the price trends shows that such falls were not “sudden”. Purchase prices dropped after it had become clear that the regulation would be adopted. The assertion that this was due to the wish to get rid of stocks of dried milk that had already been bought still remains a supposition. Prices received by retailers and processors grew. They explain this growth by higher expenditures. And this is true: prices for inputs are rising. Prices for agricultural inputs are rising as well. But dispersed milk producers cannot dictate prices. They are not able to influence the policies of milk processors and traders. It’s also difficult for them to break into the market despite readiness to buy pasteurizers, deliver milk directly to residential districts and sell it for 20-22 rubles per litre. In the situation of income 1 Кюи Н. Моделирование потребления продуктов питания в России. Анализ влияния дифференциации доходов на потребление // Агропродовольственный сектор России: опыты количественного анализа. Сборник научных статей/ Государственный университет - Высшая школа экономики. - М.: Изд.

differentiation and the predominant share of population reducing milk consumption as incomes fall due to the crisis the state should welcome and support such efforts. But this is just a theory.

After the introduction of regulation processors were granted 6 more months (the maximum shelf life of manufactured milk) within which they can sell the output already produced out of dried milk. How much of it have they hastily produced from the moment of the regulation’s adoption till its enforcement This is a rhetorical question. It implies that milk processors can cut purchase of natural milk without reducing the volume of sales. Therefore farm producers should not expect a growth of purchase prices in the next 4 months.

Processors explain the lowering of purchase prices for milk by its low quality. Farms are usually equipped with primitive laboratories while when accepted at plant milk is assessed by many parameters. There are no alternative laboratories that could make a quick and non-expensive analysis at the farm gate. In this situation agricultural producers have nothing for it but to agree with the quality assessment made by the buyer.

What will the continuation of such processors’ and traders’ policies lead to The following development is quite expectable: dairy cows will be sent to slaughterhouse. And the longer this situation persists, the bigger will be the decrease of cattle inventories. Although measures to support dairy cattle breeding are envisaged both in the State program of farm development and regulation of agricultural and food markets for 2008-2012 and the respective programs of the RF regions.

There is a paradoxical situation: while the state encourages development of dairy cattle breeding and spends money on supporting it, numerous dispersed farm producers are helpless before processors that are usually monopolized.

In case cattle inventories continue to decline Russia will have to import dried milk and manufacture liquid milk out of it. Then this milk will be consumed by population even despite the label reading “dairy drink”. There will be very little other milk. And this is not just a mere prediction but also the bitter experience of early 1990’s. Then personages were different but methods were similar: low prices, multi-months’ arrears of payments for the supplied milk that was sold each day but farms didn’t receive the money. It was this practice that undermined the dairy sector during that period but not the reorganization of collective and state farms.

One cannot say that the problem of prices received by farm producers is not currently discussed: there is a lot of press reports about meetings, intentions and plans of coping with the situation. However, measures for protecting domestic producers are needed urgently including restraints of natural milk import from the CIS countries, higher duties on import of dried milk, promotion of the practice of collective negotiations of dairy farms’ representatives with monopolists possessing milk processing plants with the participation of RF Ministry of Agriculture’s officials. This is a normal international practice.

ЭКОНОМИКО-ПОЛИТИЧЕСКАЯ СИТУАЦИЯ В РОССИИ ЭКОНОМИКО-ПОЛИТИЧЕСКАЯ СИТУАЦИЯ В РОССИИ RUSSIAN ECONOMY: TRENDS AND PERSPECTIVES THE RUSSIAN LABOUR MARKET E.Kobzar Statistics registers decrease in real salaries and wages and growth in the number of the unemployed. Meanwhile, there was noted no considerable decrease in the number of the employed in 2008. It is premature to discuss the magnitude of crisis effects on the labor market. Statistical data that allow one to judge the dynamic of crisis developments in various sectors and segments of the labor market or the picture on the whole will become available only in the beginning of the second quarter of 2009. Plus, there exist time lags between changes in the production sphere and reaction by the labor market to them – as a rule, the indicators of unemployment and the number of slashed jobs fall 2-3 months behind the start of a production slump and the fall in demand for labor. That is why the state of the labor market already fixed by statistics so far has not afforded ground to assert that the bottom of the crisis has been already passed.

The most notable development that has determined the dynamic of processes on the Russian labor market in 2008 was the global financial crisis. The positive dynamic the Russian economy has been demonstrating over the past 9 years was replaced by a downward trend. As a market for production resources, the labor market could not help but react to the slump in an array of industry branches.

Table THE DYNAMICS OF BASIC INDICATORS OF THE STATE OF THE LABOR MARKET IN 1st Q 2nd Q 3rd Q 4th Q 2008 2008 2008 The number of the employed in the economy (as 69,9 71,4 71,9 70,6 71,of end-month, as m.) As % to the respective period of the prior year 100,8 101,2 100,7 99,7 100,The number of the unemployed (monthly 5055 4273 4521 5368 averages), as thos.

As % to the respective period of the prior year 96,5 94,2 105,6 123,0 104,Unemployment level, as % to the economically 6,7 5,6 5,9 7,1 6,active population The number of the unemployed registered with 1553 1402 1286 1357 the state employment agency, as thos.

As % to the respective period of the prior year 89,7 89,3 88,9 91,1 89,The average nominal salaries due of employees 15424 16962 17556 18966 of organizations, Rb.

As % to the respective period of the prior year 128,0 129,2 129,0 119,5 125,The average real salaries due of employees of 113,4 112,5 112,2 105,0 110,organizations (with account of CPI) Wage arrears (as Rb.m., averaged quarterly) 2857,3 2756,3 2801,7 4935,3 3337,As % to the respective period of the prior year 62,0 60,7 65,8 129,2 77,Source: the Rosstat data The number of the unemployed (by the ILO methodology) was on decline in the first half of 2008 relative to 2007. It began to rise in the 3rd quarter 2008. While the rise in the number of the unemployed over the year vs. 2007 accounted for 4.3%, the respective rate in the 3rd quarter was 5.6% and that in the 4th quarter – already 23%. Between October and December 2008 the number of the jobless was growing on average at 300,000 a month, and НАЗВАНИЕ РАЗДЕЛА НАЗВАНИЕ РАЗДЕЛА НАЗВАНИЕ РАЗДЕЛА НАЗВАНИЕ THE RUSSIAN LABOUR MARKET РАЗДЕЛА in December – at 500,000. Overall, the growth rate in the number of the unemployed is in excess of the respective indices of the previous years, i.e. even with account of seasonality (traditionally, unemployment was on the rise in the last quarter of the year). The unemployment level (the proportion of the jobless in the economically active population) was on decline between January and September, while in December it posted a 1.2 p.p.

growth. The average unemployment level in the 4th quarter accounted for 7.1%, with that in December (by preliminary data)- soaring up to 7.7%, which matches the December level.

The dynamic of the registered unemployment (individuals registered by the State Population Employment Service) demonstrated a slight increase in the number of registered unemployed in February 2008; however, throughout the year the indicators of the registered unemployment were steadily lower than those in 2007.

The number of the employed has been posting an insignificant growth between the 1st and the 3rd quarters of 2008 and sank in the 4th quarter. Such a dynamic of employment (the number of the jobless on decline) was noted over a long period of time and may not be attributed exclusively to the labor market’s reaction to the crisis.

Following the other labor market indicators, the real salaries and wages likewise demonstrated a positive dynamic over the first three quarters of 2008. But already in the 3rd quarter their growth rate decelerated, and by the 4th quarter it had made up less than 10% (9.7% in October, 4.9% in November, while December saw the real salaries and wages fall – they accounted for 95.4% relative to the December 2007 level).

Wage arrears had dwindled at 35% by August and hit the 2007 level; however, they began to rise rapidly between September and December and amounted to Rb. 7.7bn by December, thus more growing more than twice compared to their December 2007 level.

Statistics registers a decrease in real salaries and wages and a growth in the number of the unemployed. Meanwhile, there was noted no considerable decrease in the number of the employed in 2008. It is premature to discuss the magnitude of crisis effects on the labor market, due to a number of reasons. First, statistical data that allows one to judge the dynamic of crisis developments in various sectors and segments of the labor market or the picture on the whole should become available for analysis only in the beginning of the 2nd quarter 2009. One can presently judge the ongoing changes on the labor market on the basis of small surveys on employers and employees. Regretfully, such surveys are not representative and do not allow extrapolation of their results onto the labor market as a whole. Alternatively, one can employ real-time indicators of the state of the labor market that will have to be adjusted. Plus, there exist time lags between changes in the production sphere and reaction of the labor market to them – as a rule, the indicators of unemployment and the number of slashed jobs fall 2-3 month behind the start of a production slump and a fall in demand for labor.

In compliance with the law, in the event of mass job cuts, the employee must receive a two-month notice. While employers have already started slashing jobs, the process has not been over as yet. That is why a greater wave of layoffs should be expected to take place in the 1st quarter of 2009.